We often encounter confusion from people regarding LTD vs. CPP, and we hope to clarify the differences with some quick points.

GeneralLTD is private insurance available through Group Insurance Benefits, usually through a workplace, or group association or by purchasing a private policy from an insurance company, while disability benefits from the Canada Pension Plan (CPP) are government-sponsored and administered benefits available to all Canadians who make contributions into the plan, usually through source deductions from your pay cheque.

Is CPP Deductible from LTD?Most Group LTD policies provide for CPP benefits to be deducted from the gross amount they are required to pay. Many insurance policies say they can estimate the amount you are entitled to and deduct the amount if you never apply for the benefit, so you should apply for them if you’re on LTD, in most cases.

Taxable or Non-Taxable?LTD benefits can be taxable or non-taxable depending on the policy or plan was set up. CPP is a taxable benefit whether LTD is taxable or not.

How is Disability Defined?Under most LTD policies there is a period when benefits are paid based on disability from your own occupation, followed by a period where it is based on disability from any occupation. Under CPP guidelines, you must be suffering from a severe and prolonged disability (not likely to return to gainful employment in the foreseeable future).

These are some of the major differences between LTD and CPP.In some cases, the interrelationship between the LTD industry and the CPP rules can be confusing and it may be difficult to know whether your insurance company is handling potential to CPP entitlement correctly.